The Nasdaq 100 futures dipped over 1% in pre-market trading, with Microsoft and Meta dropping around 4%, contributing significantly to the index’s slide.
According to Bloomberg, these two tech giants alone accounted for roughly half of the losses in Nasdaq futures.
Later today, Amazon and Apple are expected to report their earnings, adding to market anticipation.
Marija Veitmane, a senior multi-asset strategist at State Street Global Markets, remarked that Microsoft and Meta’s “disappointing” earnings reports had impacted investor sentiment.
The increased spending on artificial intelligence (AI) and cloud services raises questions about the companies’ ability to sustain profit growth.
Veitmane added, “The market is concerned about the rising investments, which might weigh on tech stocks in the short term.
However, given tech’s stronghold in quality investments, we view any pullback in these stocks as a buying opportunity in the medium term.”
Other Major Premarket Movers
Among other companies in pre-market moves, Uber fell following a lukewarm holiday forecast, while Estee Lauder’s stock plunged by 18% after withdrawing its annual guidance.
EBay also saw a dip after missing revenue forecasts, while Comcast’s stock rose due to an earnings beat.
Dollar Retreats Amid Strong Month Performance
USD Performance in Focus Amid Volatility
Despite a minor drop, the dollar remains on track for its best monthly gain in over two years.
Strong economic data released on Wednesday, including growth and job numbers, led investors to scale back on hopes for Federal Reserve policy easing.
Consequently, volatility for the Bloomberg Dollar Spot Index rose to levels last seen in December 2022, indicating heightened market expectations for currency swings approaching the U.S. presidential election.
Michael Brown, a senior research strategist at Pepperstone Group Ltd., highlighted that the dollar’s resilience aligns with the “US exceptionalism” trend, which underpins the USD’s strength.
“In this environment, I would consider buying the dollar on any dips leading into the election,” he advised.
Treasuries and Rate Concerns
Treasury yields were steady, with the two-year Treasury yield, sensitive to interest-rate changes, hovering at a three-month high.
With the U.S. economy showing resilience, concerns are emerging over inflation resurgence, particularly if the upcoming election shifts economic policy.
Daniel Yoo, head of asset allocation at Yuanta Securities, suggested that a change in the presidency could lead to inflationary pressures, possibly slowing or stalling anticipated rate cuts.
European Markets Slip as Bank Stocks Drag
European Banks and Bonds Under Pressure
The Stoxx Europe 600 index fell for a third consecutive day, on track for its largest monthly decline in a year.
BNP Paribas led the losses among European banks, sliding over 7% after weak third-quarter results.
Other banks, including BBVA, Banco Sabadell, and ING Groep, also recorded drops, while Societe Generale bucked the trend with an 11% jump after exceeding expectations.
European bond yields edged lower, influenced by euro-area inflation data that showed a faster-than-anticipated rise, suggesting the European Central Bank may maintain a gradual approach to rate cuts.
UK bond yields fell similarly as the UK government outlined substantial borrowing plans that could necessitate tighter monetary policies over the coming years.
Asian and Commodity Markets Update
Asia’s Mixed Performance and Oil’s Uptick
In Asia, major markets faced declines, led by Japan, Australia, and South Korea. The regional equity index is headed for its worst monthly performance since August 2023.
China’s manufacturing sector showed slight improvement, helping Hong Kong’s stocks rise, while mainland China posted mixed results.
Commodities also showed volatility; oil prices edged up, continuing gains from the previous session, while gold prices declined after hitting a new high earlier in the week.
The demand for gold remains high as investors seek safe assets amid the upcoming U.S. elections.
Conclusion
As earnings season progresses, investor sentiment is weighed down by tech giants’ increased spending, which has placed pressure on the Nasdaq Futures.
Global economic data and central bank strategies continue to shape financial markets, with inflation and interest rates remaining central concerns for investors.
European banks’ underperformance adds to the broader market pullback, while Asian markets struggle amid mixed manufacturing data.
In the near term, the market’s reaction to tech stock earnings and upcoming US elections will be key indicators of investor sentiment and market direction.
